Consumer confidence surges to 7-year high

October 17, 2014

WASHINGTON (10/20/14)--Despite expectations for a decline, consumer confidence gained a sizable 1.8 points in October, according to a preliminary monthly reading of the University of Michigan's consumer sentiment survey, released Friday (Economy.com Oct. 17).

While the 86.4 reading is the highest in more than seven years, forecasters have tempered expectations for the final reading for the month, as recent instability in the stock market and worries over a potential Ebola outbreak could reverse those positive feelings.

"The better reading on household confidence provides some indication that consumers' attitudes have remained unperturbed by the recent turbulence in the global financial market and the Ebola scare," Millan Mulraine, TD Securities deputy head of U.S. research and strategy, told MarketWatch (Oct. 17). "However, this initial reading is likely to be revised lower when the final print is released later this month."

The survey's headline reading, meanwhile, was driven by a positive overall outlook on the economy, buoyed by stronger hiring numbers, lower gas prices and cheaper borrowing costs, according to Moody's.

The current conditions subcomponent stood pat at 98.9 from the previous month, holding the three-month moving average for that gauge at 99.2.

Shoppers believe prices will climb 2.8% over the next 12 months, a slight drop from last month's expectation of a full 3% increase in prices.

Consumers further expect inflation to average 2.8% per year for the next five years, which is unchanged from September's expectations, according to Moody's.

"It appears that the positive crosscurrents are overpowering the negative, and barring a major shock, consumer sentiment should continue to trend higher over the next year," said Nate Kelley, Moody's analyst (Economy.com).

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